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185311153-tax-refund-gettyimagesThe child tax credit may save you money if you have a qualified child.  Here are the top five things to know about this credit as it relates to divorce:
  1. Depending upon your tax filing status and your income you may be eligible for a child tax credit of up to $1000 for each qualifying child you are eligible to claim on your tax return.
  2. An “Additional Child Tax Credit” is for individuals getting less than the full amount of the child tax credit.  This “Additional Child Tax Credit”, may give you a refund even if you do not owe any tax.
  3. Qualifications by the IRS the child must pass relating to divorce include:
    1. Child must have been under age 17 at the end of the tax filing year
    2. The child must be your son, daughter, stepchild, foster child, or your adopted child
    3. The child must not have provided more than half of their own support for the year
    4. The child must be a dependent that you claim on your federal tax return
    5. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien
    6. In most cases the child must have lived with you for more than half of the tax filing year
  4. There are income limitations that may reduce or eliminate your ability to qualify for a Child Tax Credit
  5. See IRS publication 972 for more information on the Child Tax Credit
The child tax credit is one way you may be able to lower your out of pocket tax obligation and in some cases even receive a refund if you do not owe any tax. Be sure to consult with a qualified tax preparer to determine your eligibility to qualify for the child tax credit.
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As part of organizing your financial affairs following a divorce, you should also make preparations for your financial affairs after your death. Planning your estate is an essential part of getting one’s financial matters in order at any point in life, but divorce opens up some interesting issues with estate planning. Minnesota state law has dealt with divorce and the validity of estate documents made while married in an interesting manner. Minnesota statutes Section 524.2-804 states that if a divorced person’s most current will was completed while still married it will be applied as if the ex-spouse died immediately prior to the divorce.  The ramifications are that a will remaining from a failed marriage will be applied as if both ex-spouses have died.  The property then passes on to the contingent beneficiaries, such as children and siblings.  Furthermore, the Minnesota statutes state that the dissolution of marriage also revokes any assignment of fiduciary or representative capacity on the ex-spouse, such as serving as executor, trustee, conservator or guardian. Minnesota lawmakers appreciated the importance of estate planning. The approach these statutes take is to recognize the divorce, but keep the estate documents partially in-force. Nonetheless, while Minnesota law has stepped in to ensure that your ex-spouse does not inherit your property, it has left your estate plan with a lot of question marks. If your ex-spouse is not your executor who is? That is why it is imperative to create a new set of estate documents soon after your divorce, which revokes the estate documents made while you were married.  There is a good chance that there are other people besides your ex-spouse named in the estate documents from your marriage, that you would prefer to change. Do you really want your ex-spouse’s brother handling your financial affairs? So many people delay estate planning because they don’t want to think about their death. The fact is, estate planning is more about your assets, your family and your friends. It is an opportunity to think about how you would like your assets distributed to reflect the new you and your wishes.  There is also peace-of-mind that comes from knowing you have made arrangements so that your death doesn’t cause your family any more stress than it has to.  In coming blogs, we will discuss the important aspects of estate planning in more depth, so that you can tackle the process with an appreciation of the gift this can be for your loved ones.
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The viral video of a father reaching out to his ex-Wife’s new husband, his daughter’s stepdad, and asking him to join him and walk their daughter down the aisle has had a huge impact. It has been shared millions of times. I have noticed a number of my social media friends and colleagues sharing this video. The comments seem to fall into two categories.  First, for divorced parents or children of divorce, many look at this video as a painful reminder of how horrible divorce can be. Many have memories of the strain and tension between their parents after divorce or cannot imagine ever having a connection with an exes new partner. Others see this video as recognition of the new face of divorce.  Divorce can be healthy and can lead to new families that are, in many ways, stronger and healthier than they were before.  Bonus parents or step parents can be wonderful additions to a child’s life. I see these stories all the time.  I am a collaborative attorney dedicated to helping families divorce in better ways.  I hear stories of clients all the time having better relationships with their co-parent after a divorce. Like this mother who wrote a letter to her daughter’s future step-mother or this lovely New York Times article about two divorced parents vacationing together — this can be the new face of divorce. The collaborative law process allows for creative and respectful outcomes – it keeps the children at the very center of everything and helps families thrive. Social media is drawn to thee stories because people crave these types of outcomes and want a better future after divorce.  Collaborative law provides these types of resolutions and more and more peaceful extended families.
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200150399-001As another tax season comes to a close, there are people all over the country digging through shoe boxes and file cabinets trying to meet their tax accountants’ request for cost basis information on an investment they sold last year. Hundreds of thousands of tax returns are moments away from being filed if only the taxpayer could find that elusive cost basis information. So what is cost basis, why is it so important, and why can’t anyone ever find it? At its simplest, cost basis is the purchase price you paid for an investment or piece of property. More than that, it also includes the expenses that went directly into the purchase including commissions, trade fees, appraisal and legal expenses. Cost basis can also grow over time due to reinvested dividends on mutual funds or if you made significant improvements to your property. When you sell an investment or property, cost basis is vital for figuring out if you made or lost money on the sale. The IRS wants to know your gain on the sale and expects you to pay taxes on it. If you lost money on an investment, it is important to report that as well. The loss will almost always be subtracted from your gains on other investment sales thereby lowering your tax bill. The IRS puts the responsibility for keeping track of cost basis on the owner of the investment or property. Maintaining good records on investments in particular seems to be impossible for all but the most organized. With the blizzard of paperwork that the investment company sends aren’t they keeping track of this? Yes and no. Prior to 2011, the investment companies kept track of your cost basis but they were under no obligation to transfer that information if you transferred your assets to a new investment company. Statements at your new investment company would only reflect the cost basis of investments purchased through them. As of 2011, all investment companies are required to transfer the cost basis information when transferring assets. Unfortunately, if an account has been moved a couple times prior to 2011, the cost basis of some assets is only known if the owner still has the records of the original purchase. Anyone one with a brokerage account (not an IRA which gets taxed differently) or investment properties needs to keep good records of their purchases and related expenses. While investment companies are finally doing their part, it will be years before all the investments purchased before 2011 with missing cost basis information are sold and people can throw out those shoeboxes of old statements. For anyone splitting up assets in a divorce, it is important to get the cost basis information during the divorce process. Make sure to get a statement of any investment account being split. Also make sure to get all the expense receipts for any investment properties that are being transferred. If you get this information during the divorce, you don’t have to go asking for it later only to find that the statements got thrown out during moving or mysteriously “disappeared”.
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185241979-african-american-businesswoman-on-white-gettyimages After choosing your process wisely, discussed in my two previous blogs part 1 and part II, the next step is to choose your attorney wisely. I believe this is something to approach with significant thought about your goals, careful consideration about the process you want to follow and your own beliefs and values. How do your goals and process choices affect the choice of an attorney? When I mention goals, I am not just talking about your goals. The goals of your spouse are just as important. It is important to remember you are not in this divorce alone, your spouse is also present. You both have anxiety, fears, and unanswered questions about how is this all going to turn out. Please do not forget that attorneys selected by each of you will have their own goals. Their goals may not necessarily be in alignment with your own. Ideally, you and your spouse are able to discuss your goals together. You both may have some shared goals although in the throes of divorce this may be the furthest thing from both of your minds. Each of you will have some different individual goals. I would suggest to the extent possible working together with your spouse to identify these goals as they relate to children if any, relationship and communication with each other and extended family during and post divorce, financial security goals, and divorce process goals. Your ability to articulate and document these goals will in the end minimize conflict, and give you a roadmap if you will toward selecting attorneys. You will want to choose attorneys who are able to help you and your spouse achieve your goals. A collaborative divorce attorney once wrote about asking some straight to the heart kinds of questions when interviewing any divorce attorney. A question like, How concerned are you about what my spouse wants out of this divorce? This is a great question to ask any potential attorney you may be considering. How the attorney answers this question will give you loads of information about how this attorney will go about representing you.   If they say I think you should go after all you can get and then promise or insist they can get it for you, they are playing on your emotions and telling you what you want to hear. This attorney is probably more interested in putting on a show that will take money from your family resources instead of allowing you and your spouse to keep more of your money in your family where it belongs. This same collaborative attorney offered yet another question to ask a potential attorney. Ask if they believe a couple in conflict, going through divorce, can negotiate settlement outcomes without the use of threats or coercion to get what they want. If the attorney insists on using threats and coercion, they are likely not that skilled in interest based negotiations. Instead, they draw lines in the sand using threats and coercion. This leads to even more conflict and increasing costs meaning less money for you and your spouse to keep in your family. A settlement-oriented attorney will answer this question by explaining the differences between position-based negotiation and interest-based negotiation. One last question to ask a potential attorney is if they handle all parts of the divorce or do they often use outside experts such as a child specialist when children are involved or a financial specialist. The attorney who says they handle everything themselves may end up costing you and your spouse the most. This attorney is saying they are experts with children, finances, and legal matters. Rarely, if ever, is this the case. A child specialist financial specialist can bring great value to your divorce process. A parenting plan, which goes far beyond who stays overnight when and a financial plan to give both you and your spouse comfort in knowing you will be making the best use of your financial resources should give you and your spouse a degree of comfort and peace of mind. Besides that the cost of one child specialist and one experienced divorce financial specialist will be considerably less than attorney costs for dealing with these same issues. As you listen to the answers potential attorneys give when asked these three questions outlined in this post ask yourself: Is this attorney able to help me, and my spouse, work through our differences using the process we chose? Will this attorney seek to find outcomes that work not just for me but also for my spouse? Will this attorney choose to do all the work himself or herself or will they utilize experts in specific fields such as children, finances, and or relationship coaches when needed or helpful? Hearing the answers to these simple questions can help you decide whom to choose as an attorney. Choose wisely by being intentional, thoughtful, and in alignment with your goals, values, and beliefs. Doing so will allow you to keep more of your money in your family.
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140196043-studio-portrait-of-young-man-contemplating-gettyimagesFor many, a significant portion of their post-divorce assets consist of a part of their former spouse’s company-sponsored retirement account. In order to split a company retirement account, the plan administrator of the pension, 401(k), 403(b) or other company retirement account requires a Qualified Domestic Relations Order (QDRO) or Domestic Relations Order (DRO). A QDRO or DRO is typically drafted by an attorney and signed by a judge. It directs the retirement plan administrator to divide the retirement account between you and your former spouse, in the manner specified by your divorce decree. Once the QDRO has been approved by the plan administrator, they will transfer your portion of the retirement account into a new account in your name, within the same plan. You will also receive information on how to cash out the account and have a check sent to you (a taxable event) or rollover the account into an Individual Retirement Plan (IRA) or another retirement plan in your name (a non-taxable event). A QDRO differs from a DRO in that it contains specific wording that is required under Internal Revenue Code and the Employee Retirement Income Security Act (ERISA) to divide a retirement account such as a 401(k) and 403(b). It is advisable to contact the plan administrator to obtain their QDRO model language before your attorney drafts the QDRO. Most company retirement plans have a template containing the language required to be included in a QDRO. DROs are more generic and do not contain the specific wording of a QDRO. Certain retirement plans (referred to as non-qualified plans), that do not fall under the ERISA jurisdiction, can be divided with a DRO. Note that a non-company IRA (e.g. Traditional IRA, Roth IRA, SEP IRA) does not require a DRO or a QDRO to be divided, but will require a letter of instruction detailing how the account is to be divided, along with a certified copy of the divorce decree. Typically, if you draw money out of a retirement account covered by ERISA early (prior to age 55 for a 401(k) or 59.5 for a 403(b)), you will be required to pay taxes AND a 10% penalty. However, in a divorce situation, if you were awarded money via a QDRO, you have the opportunity to take money out of a company retirement plan covered by ERISA, without the 10% penalty. Note that this withdrawal is considered taxable income and thus is subject to a mandatory 20% withholding for federal taxes and possibly state taxes too. It is very important to follow the process carefully when doing this; I highly suggest working closely with your financial planner or tax advisor. Lastly, keep in mind that dividing a company retirement account takes time. The QDRO model language needs to be obtained from the retirement plan administrator, forwarded to an attorney to draft the QDRO, which is then submitted to the retirement plan administrator for approval and division.
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As a parent to youth players and season-ticket holder to a semi-professional team, I watch a lot of soccer. My daughter’s team plays at the elite level. In a game, they move around, pass to a teammate, trap the ball, look around while the teammates move around, pass again. Three passes before any shot on goal – this is the coach’s rule.  Professionals play similarly. As I watched these girls move, pass, trap and shoot, I reflected on the greater symbolic meaning of that technique. This technique teaches the players to be better teammates. To share the field, utilize space and be mindful in the movement towards a common goal. The girls are learning ball control and how to find open space on the field so it will be easier for their teammates to find them. They are shifting from individual players to teammates – recognizing teams are better off than superstars and that where there’s a superstar, there are always superstar teammates. Ultimately, they are also learning the importance of practice, hard work and of taking the perspectives of others. This is similar to parenting. We keep moving around to get open – make ourselves open and available to our children so we can receive whatever they have to give. Sometimes they are giving love.  Or, it may be a moment of frustration, when they are lashing out. Regardless, we work hard to be open to whatever they are passing our way. Our children make a pass. We trap it. We wrangle in the emotion, or question, or need. We move it forward and pass it on. This pattern continues until we launch them into the world. Even then, we stay open for the pass back and ready to continue to help them reach their goals. Being open to the pass is important. Practice and effort take work, but there is joy in that work as well as in the outcome. With children, we often think about what we want to teach and how we want to guide and shape their futures. This year and moving forward, I want to be more present to what they can teach me.
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138710659-financial-advisor-talking-to-customer-gettyimages5 quick Divorce financial tips: These five are only a starting point.
  1. Plan your cash flow and spending carefully.  Do not over exaggerate.  You and your spouse only have so much income between the two of you.  Unless you can increase income you both will need to decrease some areas of spending simply because you are going from one household to two on the same income.  Something has to give.
  2. Have a  financial specialist experienced in divorce matters suggest ways for you and your spouse to save on taxes by utilizing head of household filing status when possible and the best use of dependency exemptions when children are involved.  A financial specialist can also recommend tax saving strategies for spousal maintenance and/or child support.
  3. If existing debt is a problem consider using an accredited consumer credit counseling agency to help you set up a debt management plan.  This does not affect your credit rating since you will still be repaying all of the debt.  The agency will work to negotiate a lower interest rate with each of your creditors.  You will make one payment to the consumer credit counseling agency.  The monthly payment you make to the agency is often much less than the combination of the payments you were making before.  The agency makes payments to each of the creditors for you.  There is the potential to save a bundle in lower interest rates and in some cases no interest giving you the ability to pay off your debt earlier than you ever thought.  Two such agencies in the Minneapolis Saint Paul area are Family Means and Lutheran Social Services  and no you do not have to be Lutheran to utilize their services.  In worst-case scenarios, bankruptcy may be a consideration.  Both of these agencies provide bankruptcy counseling and are able to refer you to bankruptcy specialists if and as needed.
  4. If existing debt is a problem do not make it worse by adding to that debt.  Find other ways such as sacrificing today for a better tomorrow, increasing income, lowering expenses or some combination of all these.
  5. With retirement assets, it is common for a financial specialist trained in divorce matters to help one spouse or in some cases both spouses recommend strategies to come up with down payments for new housing purchases.  This usually involves the use of a Qualified Domestic Relations Order (QDRO).  A portion of an employer retirement plan is awarded to the lower income spouse, income taxes on the distribution are planned for, and if the distribution is incident to a divorce the spouse awarded a portion of the employer retirement plan will avoid the pre 59 ½ early distribution penalty.
Utilize an experienced divorce financial planning specialist.  They are your best resource for helping you keep more of your money in your family.
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116029268-charity-donation-form-gettyimagesThe holiday season is when many people do a significant portion of their charitable giving for the year. Once you have decided which charitable organization to support and how much, you should also consider how to give that support. What I am getting at is that you can be charitable and tax-savvy by donating highly appreciated stock. Donating a highly appreciated stock or mutual fund is a great strategy for getting rid of an investment that you have been holding because you do not want to pay the capital gains tax. The beauty of donating “in-kind” some or all of a security holding is that you get the full charitable deduction without paying the capital gains tax. “In-kind” means that the investment is not sold, but is transferred as-is to the charity instead. This way you do not have to pay the capital gains tax, because you did not sell the investment. The charity will likely sell the investment to meet their funding needs, but as a non-profit organization, they pay no tax on the sale. The catch is that you have to have owned highly appreciated investment for more than one year. If you transfer an investment that you have owned for less than one year, you can only deduct your original cost in the investment and not the appreciation! Of course this strategy is a bit more complicated than writing a check. You will need to obtain account information from the charity as to where to transfer the highly appreciated investment. You will then need to contact you investment broker and direct them to transfer the investment to the charity’s account. It is not difficult though; most charities are more than happy to help and it is something that investment brokers handle for their client on a regular basis. The transfer has to occur by December 31st to qualify as a current year contribution. You cannot donate investments that have lost value and deduct their higher original cost. If your donation totals more than $250, the donation must be recorded – meaning that the charity must send you a written statement describing the donation and its value. You or your tax preparer will also need to fill out and include Form 8283 Noncash Charitable Contributions in your tax return, listing information about the charity and investment contributed. Despite the extra work, donating highly appreciated stocks or mutual funds can be a win-win for you and the charity. This holiday season think about sharing some of your investment success with your favorite charity instead of with the IRS in April.  
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525444317-studio-shot-of-females-hands-holding-broken-gettyimagesMarried, separated, or divorced alike, it’s hard not to feel anxious about the upcoming holiday season. Whether you love it or are dreading it, the 2015 holiday season is just around the corner. Maybe you are feeling that there is no way you are going to get through this year with your emotions in check. You are not alone. Whether you are feeling anger, sadness, grief, frustration, anxiety, etc. it is important to feel balance this time of year. How do you do that, especially if you are still grieving from your divorce? We can’t (and shouldn’t) try to banish these emotions. However, we can be intentional and generate positive emotions to help redistribute the weight of these negative emotions. So how can you do that even if you are feeling completely down this time of year? We’ve blogged previously about ways of helping others and paying it forward as ways to help ourselves emotionally, and ‘tis the season of a vast array of opportunities to help others, but here are some additional ideas for creating positive emotions in your world: Finding Nature: Nature has an amazing way of soothing us without words. Sit down and make a list of places nearby to visit nature. Maybe some are as easy as stepping out your front door and others maybe involve a little bit of a drive. Even that drive to get their can prove to be therapeutic. Nature heals and being in nature, or even viewing scenes of nature, has been shown to reduces anger, fear, and stress. Exercise: It’s no secret that exercise can help to balance your emotions – whether it’s running, walking, yoga, or even a team sport, find what you love and carve time out of your schedule to do it! When you exercise, the body releases endorphins that minimize the sensation of pain. These endorphins elevate your mood and reduce feelings of anxiety. You will also feel better when you exercise and because you are healthier, you will have more energy, and feel more balanced. Distractions: Distractions can be a positive solution for balancing emotions. Although you might be thinking that distractions will just bury your feelings to come out later on, healthy distractions provide positive emotions that will help you to release some of the negative feelings. Make a list of both healthy and unhealthy distractions that you tend to gravitate towards. While an unhealthy distraction like having drinks with friends seems like a good idea in the moment, a healthy distraction like Saturday morning coffee with a friend will prove to be better for your emotions. Focus on the Positive: Right now you might be thinking, “what positive?” At Daisy Camp we love the quote, “There is always, ALWAYS, something to be thankful for.” Maybe you’ve found journaling a helpful process for you through your divorce, which is great, but if you read through it, it may bring on raw and deep negative emotions, so start a separate gratitude journal. Make lists of what you are thankful for (past, present, and future), and try to add to that list daily. When you are feeling down – read that journal. Wishing you strength and positivity as you balance your emotions this holiday season. Remember that, “Nothing can dim the light that shines from within.” Maya Angelou. You will make it through this.